The #1 Reason To Bet Against Tesla

by Andrew Zatlin July 25, 2023 1:00 pm ET

After this week's price cut, the cost of a Tesla is down 20% this year.

Meanwhile, Ford just announced it's cutting the price of a F-150 Lightning EV by $10,000.

What's with the price cuts on the most popular EVs?

Today, I'll explain what's going on here…

Then I'll share a trade to take advantage of it — a trade that could return hundreds of percent.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

Is This a Crisis?

What's with all these price cuts on EVs? Is this a crisis?

Not at all. Let me put this in perspective.

Ford makes over half a million cars and trucks every quarter. But only about five thousand of them are Lightning EVs. That's barely 1%.

Even if you add up all its EV models, they account for just three percent of its total output.

Having said that, a real problem does exist with EVs…

Underperformance and Overpricing

To explain what this problem is, look at the F-150.

This has been the hottest vehicle in the U.S. for forty-one years. It's a winner.

So when Ford started selling an EV version of it, it decided to put a price tag on it that was $10,000 higher than its gas-guzzling cousin.

But if you look at its actual performance, it's underwhelming. For example, it can only tow 10,000 pounds, whereas the gas-guzzling version of it can tow 14,000 pounds.

In other words, you're paying more, but you're getting less.

And that helps explain why Ford buyers just weren't that into it.

A $10,000 Price Drop Makes Sense

The thing is, this is early days for EVs.

Until recently, for example, you only had two kinds of EVs you could buy, right?

You had cars like the Chevy Leaf, good for tree-huggers. And then you had Teslas, the upscale EV. There was nothing in between.

So when Ford came out with the F-150 Lightning, it decided to sell it at a premium, like Tesla — because it's all-electric, and it figured that should be enough for the virtue-signaling crowd.

But as it turns out, the F-150 isn't for the virtue-signaling crowd. Buyers of this pickup aren't into image, they're into capabilities.

And to give credit to Ford, it realized its mistake and quickly reversed course.

That's why it removed the $10,000 premium for the Lightning.

Look What's Coming

Like I mentioned earlier, traditionally, there were only two options:

At the high-end, Teslas. And at the low-end, cars for tree-huggers.

But if you look at what's coming from Ford, GM, Toyota, etc., about thirty new EVs are about to hit the market.

For consumers like us, this is amazing. We'll finally have some good options to choose from.

And when there's competition, prices will come down.

Tesla Could Be in Trouble

And that helps explain why Tesla could be in trouble here.

For example, Toyota is saying that it'll soon be making one and a half million EVs per year.

That's great for Toyota. At levels like that, it'll get economies of scale.

But this is a problem for Tesla. At its size, Tesla doesn't get economies of scale.

Tesla's more like Apple. It's a pioneer. It's got nifty technology.

But Apple only has 20% market share. And a number like 20% market share is where Tesla is doomed to go. Because a high-end Tesla costs a hundred thousand dollars. That's a luxury price tag. And if we're being honest here, a Tesla interior fails to live up to the expectation of what a luxury car should be, right?

Meanwhile, all these other car makers are piling in. They're going after the high-end, too!

And with Tesla's low-end model now just $40,000, the company could lose its luxury image.

Let Other Companies Do the Dirty Work

So where does Tesla go from here?

In my opinion, Tesla needs to get out of the car-manufacturing business and stick to what it does best: creating great technology.

It's got great battery technology. It's got great driver-assistance technology. Stick to that. Let other companies do the hard, dirty work of making cars.

Bottom line, the EV market is finally moving into the next stage.

We're about to see millions and millions and millions of EVs hit the market. And when that happens, Tesla's ability to stay competitive will be put to the test.

Now, as this relates to a trading idea, check this out:

For "Pro" subscribers, I've got a seriously high-octane trade idea.

This one isn't for the faint of heart.

But if I'm right, it's going to pay off big — like hundreds of percent.

In the meantime, remember: we're in it to win it!